Obama vows to cut huge deficit in half

President Obama will announce Monday that he plans to cut the nation’s projected annual deficit in half by the end of his first term, a senior administration official said Saturday.

The plan will make explicit what Obama officials have been suggesting for months: Contrary to his campaign promise, Obama will allow the Bush tax cuts on the wealthiest Americans expire as scheduled at the end of 2010 instead of seeking their repeal sooner. Officials determined that seeking to raise the taxes earlier during a recession was a bad idea, advisers said.

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Obama, who will speak Monday to a Fiscal Responsibility Summit at the White House, also will outline steps he is taking to eliminate what his staff calls “accounting gimmicks” used by previous administrations.

“This budget actually is going to assume that there will be a hurricane, tornado, earthquake, flood or manmade disaster in the United States in fiscal year 2010, and each year going forward 10 years,” the official said. “The Bush budget never assumed that.”

Under White House projections, this year’s inherited budget deficit of $1.3 trillion will be cut to $533 billion by fiscal year 2013, the end of the first term.

“So we’ll cut it at least in half,” the official said.

That represents a decrease from 9.2 percent of the gross domestic product, a measure of the nation’s output, to 3 percent, the administration estimates.

The official said the bulk of the savings come from winding down the war in Iraq, additional revenue from raising taxes on the wealthy, and other cuts and savings to be specified later. Officials have said the budget creates room to start an ambitious overhaul of the nation's health-care system, which Obama aides view as a key to the government's fiscal future.

Obama said in his weekly address on Saturday that a budget blueprint he is releasing Thursday will be “honest in its accounting.”

The budget provides a projected cost of the wars in Iraq and Afghanistan (“overseas military contingencies”), assumes the full cost of fixing the alternative minimum tax each year and does not assume deep cuts in Medicare physician payments.

“Arthur Andersen [Enron’s accountant] is no longer in business, and now Arthur Andersen-accounting will no longer be in business,” the official said.

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“If we used these gimmicks, it’s $250 billion annually, or about $2.6 trillion over 10 years, which show up now on our bottom line because we’re not hiding it,” the official added. “This money was always being spent, just no one actually accounted for it.”

On Tuesday evening, Obama will outline his broad plans in an evening address to a joint session of Congress.

On Thursday, the White House will release a 150-page “Economic and Budget Policy” document with an overview of its plans. Such an abbreviated document is customary in a first term. The foot-thick budget details will be sent to Congress in April, officials said.